Financial lessons coming up short

Most students who graduate from Colorado high schools come away with at least a basic understanding of algebra and geometry.

Yet they often leave school without knowing how to balance a checkbook, comprehend compound interest or live on a budget.

In a region where hundreds of hardworking families struggle with poverty, and in a country where last year Americans spent more money than they earned and hundreds of thousands are in foreclosure, money experts say the know-how to manage one’s assets, no matter how meager, can make the difference between security and financial ruin.

Take credit cards. Making minimum payments on a high-interest credit card can lead to interest payments that can rival or exceed the price of whatever was originally purchased and take years to pay off.

Conversely, saving even a few dollars by living on a budget can lead to monetary gains if those dollars are invested.

“It’s just the basics of understanding the numbers,” said Bernard Benyak, a tax manager and financial planner who volunteers to teach personal finance classes in local high schools. “You’ve got to know what you’re getting yourself into.”

That know-how is lost on most teenagers, he and others said.

According to a 2007 study by the National Council on Economic Education, 28 states require schools to implement educational standards in personal finance, but just nine states actually test students’ knowledge of the subject. Seven states require students to take a personal finance class to earn a diploma.

Colorado has no such standards.

In the Pikes Peak region, the basics of money management are left primarily to parents and outside organizations. A few schools, such as Harrison High, offer personal finance as an elective, and some schools broach the subject in broader classes such as economics.

Educators often say their goal is to produce a wellrounded graduate who’s equipped with a blend of skills, character and knowledge that will steer them toward success. That may include a health class warning about teenage pregnancy or a lesson in technology that may be essential in a future workplace.

Those who teach personal finance, however, believe more should be done to focus on the financial nuts and bolts, both in Colorado and nationally.

“Our whole country needs to get better at basic financial literacy for high school kids,” Benyak said.

In a 2007 national poll of teenagers and their views on money, 11 percent said they relied on their parents to pay their debts without considering how to manage monthly payments.

The survey was conducted by Colorado Springs-based Junior Achievement Worldwide, an international nonprofit organization whose mission includes teaching financial literacy to young people.

More than 15 percent of teens surveyed said they made the minimum monthly payments on their credit cards and 2.4 percent said they occasionally skipped payments, a practice that hurts credit-bureau scores.

Fewer than 3 percent of 13-to 14-year-olds said they had credit cards, the survey found, but that rose to 5.3 percent for 15- to 16-year-olds and leaped to 28.8 percent for 18- to 19-year-olds.

“We need to do a much better job of preparing our children to avoid the financial pitfalls that so many adults have faced, by teaching our kids how to effectively manage their money,” Junior Achievement president and chief executive officer Gerald M. Czarnecki said in a statement accompanying the survey.

Junior Achievement questions whether parents are up to the job.

The survey found that nearly three-quarters of teens had regular family discussions about money but that teens demonstrated a lack of financial understanding.

JA spokeswoman Stephanie Bell pointed to adults’ poor financial track records, such as the high foreclosure rate.

Another group, the Jump$tart Coalition for Financial Literacy, has conducted surveys that spotlight a general lack of understanding of money. In a 2006 national survey by the group, 40 percent of high school students didn’t know their parents’ health insurance was dependent on their employment.

Harrison High’s Michael Armstrong teaches personal finance. Most of his students, he said, are “naive” about basic financial concepts when they enter the class.

“We try to get them to see you’re not going to pay the price-tag price for something,” he said, referring to creditcard purchases. “You know, it’s a survival class as much as it is anything else for these kids.”

Sometimes, he hears from students whose parents inquire about how to get a few financial lessons of their own.

When Benyak and his fellow financial experts go to a classroom, they try to show students the power of compound interest. Last school year in a class at Doherty High, students were told how saving $4,000 a year could make a young person a millionaire by 65 at a 9 percent interest rate.

But for each student who might come away with new understanding, many others will likely fall victim to slick marketing, fine print, or other financial pitfalls.

Armstrong puts it this way: “It’s kind of like teen pregnancy. Just because you don’t want to admit that it’s there doesn’t mean that it isn’t.”

CONTACT THE WRITER: 636-0198 or bnewsome@gazette.com

VOICES OF NEED

DIANE SMITH, RETAIL CLERK

Smith, 45, of Colorado Springs is unmarried and has custody of three grandchildren.

How she got here:

The expense of looking after three grandchildren and taking care of an ill daughter is wearing on Smith, she said. She gets an adoption subsidy from the government of about $400 per month each for two of her grandchildren, whom she’s adopted, and another $99 per month for taking care of the third. Her parttime job at a bakery thrift store brings in about $150 per week. “When you’re feeding three kids, it don’t work,” she said. She wants to find a better-paying job, but “I don’t have the computer skills, and right now I don’t have the money to get the computer skills.”

Stretching dollars:

“You make do, you give up the luxuries,” Smith said. The Family Dollar store sells children’s clothes for $6 or $8 that might cost $20 at Wal-Mart, she said.